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Distribution strategies logistics and performance of firms in Port Harcourt (case study of bakery in port harcourt)

Abstract

This study was carried out on distribution strategies logistics and performance of firms in Port Harcourt. The study focused on bakeries in Port Harcourt. It was therefore limited to Dripples Bakery in Port Harcourt. Survey research method was adopted to sample the opinion of managers in the Marketing, Distribution and Finance departments of four manufacturing firms selected through convenience sampling for this study. Questionnaires and oral interviews were the main instruments used in collecting primary data for the study. While information obtained from textbooks, journals and materials from the internet provided the guideline for setting the hypotheses and designing the questionnaire. It was concluded from the study that most consumer goods manufacturing firms in Nigeria have not fully tapped in to the benefits of well designed and efficiently managed distribution channel system. It was also concluded that the type and nature of the product determines the intensity of its distribution. Firms whose output and markets are limited should for economic reason spin-off the channel functions to other members of the channel. Similarly, there is need for consumer goods manufacturing firms in Nigeria to adopt more innovations in their channel approaches. E-commerce or sales through the internet is becoming a means to serve larger number of customers at much lower costs. Broader acceptance of electronic data interchange to monitor sales and inventory levels throughout the total channel is reducing inventories and speeding response to changing customer requirements. The study recommended that manufacturers should make efforts to integrate their channel system as this will enhance more effective co-ordination of their channel functions and reduce conflicts in the channels. Finally, government should provide the necessary infrastructural environment that will enable the smooth and free flow of goods from the point of production to point of consumption.

 

 

TABLE OF CONTENTS

Abstract

CHAPTER ONE: INTRODUCTION

1.1       Background of the study

1.2       Statement of the Problem

1.3       Objectives of the study

1.4       Research Questions

1.5       Significance of the Study

1.6      Scope and limitation of the Study

1.7       Definition of Terms

1.8       Company Profile (Dripples bakery)

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1       Theoretical framework

2.1.1    Postponement and Speculation Theory

2.1.2    Functional Spin-Off Theory

2.2       Conceptual review

2.2.1    The Concept of Distribution in Marketing

2.2.2    Distribution Channels

2.2.3    Distribution Channel Structures or Levels

2.2.4    Marketing channels in bakery industry

2.3       Empirical review

CHAPTER THREE: RESEARCH METHODOLOGY

3.1       Introduction

3.2       Research Design

3.3       Sources of Data Collection

3.4       Area of the Study

3.5       Population of Study

3.6       Sample Size Determination and Selection Method.

3.7       Data Collection Instruments

3.8       Validity of Instrument

3.9       Reliability of Instrument

3.10     Data Analysis Techniques

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1       Data Presentation

4.2       Discussion of findings

CHAPTER FIVE: CONCLUSION AND RECOMMENDATION

5.1       Introduction

5.2       Conclusion

5.3       Recommendation

5.4       Suggestion for Further Studies

References

APPENDIX

QUESTIONNAIRE

CHAPTER ONE

INTRODUCTION

1.1       Background of the study

The consumer goods sector is a major part of the manufacturing sector in Nigeria. In the view of Adirika, Ebue and Nnolin (2001) distribution is demand creation and satisfaction and both directly and indirectly brings down the total cost of marketing organization. Like all other manufacturers, the consumer goods industry is characterized by low valued added production. What we see are processors who process imported raw materials into finished products, with very little value added. Multinational companies operating in this industry hardly add value because they import concentrates from their parent companies, which they convert into finished products with minimal value added. The industry is dominated by wholesalers and distributors. In fact distributors and wholesalers account for over 50% of total sales within the industry (Lead Capital, July 2009). Their dominance is as a result of fragmentation nature at the retail end of the market. The retail end lacked adequate supermarket and glossary stores. They mainly compose of roadside kiosks, stores and small sized restaurants, whose sales volumes are generally low. Distribution to the retail market is hampered by huge investments required for delivery trucks coupled with the general bad road network. Consumer goods industry in Nigeria is highly fragmented with the presence of multinationals, domestic and foreign companies.

Over the years, distribution channels have been widely discussed in the marketing literature by academics, professionals and other agents of marketing including manufacturing firms and products distribution agencies especially on factors relating to costs of distribution of products. Distribution costs could have significant financial burden that may impact on the profits of manufacturing firms and by implications on the economy of a nation such as Nigeria. Many business concerns fail to achieve set objectives despite producing very high quality goods because they do not accord distribution, the importance it deserves. Thus, one may be tempted to ask: what is the economic worth of an effective productive actively that fails to give the physical flow of the entire inventory the attention it deserves? Kotler (1986) states that physical distribution activities when uncoordinated could tend to high cost that consequently affect the level of service rendered by firm and the profit accruable to it. In the circumstances, the benefits of business efforts are swallowed up resulting to loss or mere break-even instead of the expected profit objective. Therefore, for a total realization of a company’s profit objectives and customer satisfaction, its distribution channel strategy must be carefully diagnosed, planned and implemented since production is not complete until goods are in the hands or within the reach of the final consumer.

Furthermore, it should be noted that the design and management of effective and efficient distribution channels offer significant, frequently untapped opportunities for firms to create unique long term strategic advantages. Superior performance of channel activities has become a major route to providing extraordinary value to end users. All around the world, firms are increasingly recognizing these opportunities in channel management and are rapidly adapting to the dramatic changes that have occurred in the organization of channel activities. According to Uduji and Nnabuko (2011), Global marketing channels are becoming more important to companies seeking growth abroad. Manufacturers introducing products in foreign countries must decide what type of channel structure to use – in particular, whether the product should be marketed through direct channels or through foreign intermediaries. They advised that Marketers should be aware that channel structures in foreign markets may be very different from those they are accustomed to in the home country.

Regrettably, even though issues associated with distribution have become central to the growth and well-being of firms, industries and society in general, the education and research activities devoted to this “place element” of the marketing mix are sparse. It is against this background that this study aims at evaluating the distribution channels of bakeries in Port Harcourt, Rivers state with a view to developing more profitable ways to bakeries to reach the market and end users.

 

1.2       Statement of the Problem

All around the world, more and more companies are discovering that their accustomed approaches to selecting and managing sales and distribution channels no longer work. The channels cost too much and provide too little value. They meet neither the needs of the manufacturer nor the end customer. In the Nigerian context, the situation is worse when considered against the backdrop of the poor infrastructural environment in which the companies operate. In support of this view, Nnolim (2003) says that the distribution system in Nigeria i.e the general set-up to channel the product of labour and capital to both intermediate and final consumer can best be described as haphazard, long-winded and generally inefficient. The cost of the system arises from a high degree of duplication of functions, highly atomized units of channel membership and operation, arbitrary margin setting, margin taking without the performance of the corresponding function which is then shifted. The added cost burden of poor infrastructural environment in the form of limited network of roads and rail lines, bad roads, poor storage facilities, high cost and unavailability of information and vital fast reliable communication net work is also very real. Hence, over the years, consumer goods manufacturing firms in Nigeria are faced with the challenge of designing and selecting channels of distribution that will ensure maximum savings in distribution cost, enhance product availability and effective coordination of activities.

In recent times, more efforts are being channeled towards achieving the above stated objectives based on the realization that the design and management of effective and efficient distribution channels offer significant, frequently untapped opportunities for firms to create unique, long-term strategic advantages. Reducing the amount of time, energy and effort expended in acquiring goods and services has become as important, if not more so, as being offered a reduction in their purchase prices (Louis W.S. and Barton A.W, 1997). Decisions about the marketing channel system are among the most critical facing management today. Creative, well-executed marketing channel strategies provide some of the more potent means by which companies can enhance their ability to compete domestically and internationally. Unfortunately, most companies concentrate their efforts and energies on other business functions, such as finance, production, research and development or on elements of marketing other than distribution in their attempts to secure competitive advantage. For a number of companies, a critical assessment and revision of their marketing channels are long overdue.

Manufacturing firms in Nigeria are wrapped in the quagmire and confounding problems of how to provide fast deliveries to customers, maintain optimum inventory volume, minimize use of warehouses at the least carrying costs of stock, reduce total distribution costs and maximize customer satisfaction. Manufacturers need a new template to guide them to sales and distribution channel choices which better match channel costs with value and which offers the potential for competitive advantage. All these can be achieved through selecting appropriate distribution channels. This study therefore focuses on the task of carrying out a thorough strategic and empirical research and investigation that could come up with practical and cognate solutions to the above problems in bakeries.

 

1.3       Objectives of the study

This study has the major objectives of evaluating the distribution channels of consumer goods manufacturing firms in Nigeria with a view to making appropriate recommendations for effective and efficient distribution channel management. The following specific objectives are considered relevant to the achievement and realization of the major objective of this study.

  1. To find out whether the control exerted by the firm on the distribution channel depends on the length of the channel.
  2. To examine the influence of hybrid channel conflict on distribution channel performance.
  3. To determine the relationship between the control exerted by a firm and satisfaction with its existing channel.
  4. To examine the influence of the length of a distribution channel on the channel’s performance.
  5. To find out whether the number of distributors in a distribution channel influences the channel’s performance.

1.4       Research Questions

In the light of the problem stated above, a number of research questions demand answers from this study.

  1. Is there any significant relationship between the length of a distribution channel and the control exerted by the firm?
  2. Does a hybrid channel’s conflict have any significant influence on the channel’s performance?
  3. Does the control exerted by a firm have any significant influence on the firm’s satisfaction with the existing channel?
  4. Does the length of a distribution channel have any significant influence on its performance?
  5. Does the number of distributors in a distribution channel have any significant influence on the channel’s performance?

 

1.5       Significance of the Study

There had been studies in marketing literature relating to distribution channels in the past but such studies may not have comprehensively made serious impact on distribution channels for consumer goods. This study has a robust and comprehensive treatment of all the components combined that make for concrete and standard contribution to efficient and effective distribution channel management. The findings in this study will expose the problems of distribution channels and proffer solutions for the benefits of manufacturing firms, the consumers, the government and the entire publics. They will serve as guide to the management of the companies in selecting distribution channels that will ensure cost reduction, greater profitability and customer satisfaction. To the academic world, this study will not only add to the body of knowledge but will also inspire further research in distribution channels.

 

1.6      Scope and limitation of the Study

Distribution Channels are the main focus of this investigation and is targeted at consumer goods manufacturing companies in Nigeria. The study was limited to Dripples bakery, Port Harcourt, Rivers state.

The study focuses on strategies logistics and performance of firms in Port Harcourt, specifically consumer goods in Nigeria. The primary limitation to the study is the unwillingness of those in possession of information to give it out for fear of exposing official secrets. Finally, the dearth of published data on the topic also posed great limitation to the study.

 

1.7       Definition of Terms

For easy understanding of the research report, the following key concepts have been defined in this study in order to eliminate possible confusion.

Channel structure: Is the manner in which a set of distribution tasks has been allocated among the channel members (Rosenbloom, B, 1990).

Consumer goods: These are goods or services that are destined for ultimate consumer in such a form that they may be used without additional processing. They are goods for the final user or consumer (Onah and Thomas 2004).

Distribution channel: It is the pathway taken by goods as they flow from point of production to point of consumption (Amarchard and Vavad 1997).

Distribution:  It is that marketing function responsible for moving goods and services from the point of production to the point of consumption.

Exclusive Distribution: It means severely limiting the number of intermediaries. It is used when the producer wants to maintain control over the service level and outputs offered by the resellers. (Kotler and Keller, 2006).

 

1.8       Company Profile (Dripples bakery)

Dripples bakery is an exquisite cake company with excellent quality controls and we pay attention to every detail. Dripples bakery is owned and managed by Tareela Okene and is known as a major pastry producing bakery in Nigeria. Dripples cake also provide job opportunities and train staff to professionals in the craft of cake decorating. Dripples bakery creates ripples of happiness for its numerous customers by providing them with good quality products and services. Their success is built on the strategy of timeliness and excellent services.

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